Till today, gold has been one of the top favourite go-to investment avenues for the majority of the investors for decades now. This metal hasn’t lost its shine and presence in the minds of the people, especially in Indians. Whether it’s a marriage event or any gala, Gold is chosen as an absolute wearable to give a finishing touch to the final look.
If the market turns volatile or inflation hits the economy, investors look up to gold, as a savior, that can be used as a hedge. This shimmering metal can be a handy asset for investors who are holding stocks, as it’s a wavering market. Now, if you are an investor planning to invest in gold, then you have to keep these five things in mind.
1. Physical Gold Vs Gold Stocks: There’s a subtle difference in buying physical gold and investing in gold stocks. Both are not the same, as physical gold involves tangibility of the asset. Meaning, you feel the physical presence of this metal. When it comes to gold stocks, you are not splurging your money into physical gold, instead, you are investing in gold-mining and gold-related companies. Putting money into gold stocks is one way of getting exposure to gold and gold markets.
2. May Not Deliver Substantial Returns: Gold may not give you substantial gains on your investment but it’s the safest choice when the economy is going through a turmoil. It’s probably not the best choice for investors looking for long-term gains. However, it’s a plus one when it comes to wealth generation or security during financial pitfalls.
3. Best Go-To Asset for Diversification: Investing in gold can be done in myriad ways. One can invest in gold via gold-mining company stocks, gold ETFs, through buying physical gold, etc. If there’s any asset that barely reduces the purchasing power, it’s gold. The best part of investing in this shimmering metal is that there’s no counterparty risk attached to this asset as well.
4. Acts as a Hedge Against Uncertainties: While some invest in gold for safety purposes or store their wealth without being affected by economic downfall, some invest in this asset for hedging purposes. When an unprecedented event happens, leading to rise in prices, or very lately, a pandemic has struck the economy by a storm, gold can be a conducive asset to recover you from the market unrest.
5. Liquidity and Marketability: People buy gold not just for luxury manifestation but also for investment purposes as well. Paper gold is more liquid in nature as you can simply trade it in the bullion market for swift money. You can sell gold to anyone irrespective of the location the buyer or seller is from. As far as marketability goes, the spread for gold is narrow compared to other assets, which makes it easily marketable. The narrow the spread (difference between the ask and bid price), the better the marketability of the asset.